Angola’s finance minister Vera Daves de Sousa reported that recent talks with the IMF are exploring financing options as the country deals with rising bond yields and a decline in oil prices. Currently, Angola faces significant debt obligations while relying heavily on oil revenue, which prompts reconsideration of fiscal strategies and potential alternative financing sources.
Angola’s finance minister announced last week that discussions with the International Monetary Fund (IMF) regarding potential financing packages were underway due to soaring bond yields and declining oil prices. Ministers like Vera Daves de Sousa are grappling with the repercussions of an energy slump that has left the country largely sidelined from the international bond market.
In a recent interview held during the IMF-World Bank Spring Meetings in Washington, Sousa mentioned they were not making a formal request yet but were exploring financial options. She emphasized the need to review any proposals brought forth by the IMF with government officials and President Joao Lourenco before any official approach would be considered.
On Monday, Angola’s dollar bonds showed some positive movement, with the yield on 2048 dollar bonds declining to about 13.05%. Along with bonds maturing in 2028 and 2029, they displayed strong performance amid a challenging climate for emerging markets. However, the looming debt burden weighs heavily as Angola gets set for a wave of rising loan payments, with substantial portions of fiscal revenue now funneled into salaries and debt servicing.
The situation is compounded further by a $864 million bond maturing in November. Angola has navigated two IMF programs since the civil war ended in 2002. The most recent one was in 2018, which totalled $3.7 billion in an extended fund facility. Now, as Africa’s largest oil producer after Nigeria and Libya, Angola is eyeing financing from alternative sources like the World Bank and African Development Bank, sidelining international debt for the time being.
Sousa noted, “We will continue exploring those avenues and we will squeeze expenditures” to cut down on financing needs. She remarked it’s “most likely” Angola will refrain from tapping into international debt markets until yields fall back into single digits. This contrasts sharply with their earlier ambitions of raising approximately $1.5 billion in bond sales over the course of 2025.
Yields on Angola’s dollar bonds have spiked to about 13.5%, with spreads from US Treasuries nearing 1,000 basis points, a level often seen as distressed. Despite a pick-up in economic activity last year, Angola remains deeply reliant on oil, which constitutes nearly all exports and around 60% of government revenue. With Brent crude prices teetering below $67 per barrel—around a 10% drop this year—economists are wary of the potential risks from rising US tariffs that could stifle global economic growth.
To better understand its fiscal resilience, Angola conducted a “stress analysis” examining the impacts of oil price slumps. Sousa stated that if oil prices hover around $55, the country could weather the storm without any further assistance, though it would require considerable expenditure adjustments. The current budget operates under the assumption of an oil price benchmarked at $70.
As part of broader revenue-raising initiatives, the government aims to finalize stake sales in major firms like Unitel SA, Banco de Fomento Angola SA, and Standard Bank de Angola SA within the year.
To sum up, Angola is actively exploring financing options with the IMF amid rising bond yields and a significant slump in oil prices. As the country faces increasing loan payments and rising debt obligations, it’s likely to avoid international debt markets until yields drop significantly. Angola’s economic health remains tightly linked to oil revenues, prompting reassessments of fiscal strategies as external factors introduce new uncertainties. The government’s planned stake sales may also help bolster revenues moving forward.
Original Source: financialpost.com
